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Fed raises interest rates for third time in 2018, citing job growth

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Traders work on the floor of the New York Stock Exchange in New York City. The Dow climbed immediately following the Federal Reserve's policy announcement Wednesday that increased interest rates another quarter-percent. File Photo by John Angelillo/UPI

It was the third interest rate increase this year by the Federal Open Market Committee.

"Economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low," the FOMC said in a statement. "Both overall inflation and inflation for items other than food and energy remain near 2 percent."

The Dow Jones industrial Average was up slightly before the Fed's decision Wednesday, but gained an additional 35 points immediately after the announcement. The Dow typically shows little movement on days of Fed policy announcements.

The Fed also offered projections for the economy -- calling for a change in real GDP in 2019 of 3.1 percent, above the 2.8 percent goal of the Trump administration. The Fed said it expects the GDP to fall to 2.5 percent next year, to 2 percent in 2020 and 1.8 percent in 2021.

Unemployment is expected to stay relatively steady through 2021, it said, with projections of 3.5 percent -3.7 percent. Inflation is expected to stay in the 2 percent range for the next three years.

A potential wildcard in the Fed's projections is U.S. trade policy. Wall Street has focused on strong economic data and corporate fundamentals instead of tariffs and other trade issues. Experts say short-term volatility based on fears that trade disputes, notably between the United States and China, could bring chaos to markets.